Crops Analysis | August 8, 2022
Price action: Corn futures finished lower but above opening levels and closer to the daily highs. December corn dropped 2 3/4 cents to $6.07 1/4.
Fundamental analysis: Corn futures were pressured primarily by weather as some dry areas of the western Corn Belt received rains over the weekend, with potential for more the next couple of days before warmer, drier conditions return. Not all areas received rains, however, which limited seller interest on the day. Aside from weather, traders continued to monitor Ukraine grain exports. Of the 10 shipments thus far, seven have been loaded with corn, totaling around 243,000 MT. While that’s not a large volume, the shipping activity picked up over the weekend.
USDA’s weekly corn export inspections totaled 555,620 MT (21.9 million bu.), down significantly from the previous week. But when combined with June Census data that caught a lot of exports to Canada that weren’t reported via weekly inspections, the pace needed to hit USDA’s export target dropped to 18.4 million bu. per week through the remainder of the marketing year.
Barring any major surprises in USDA’s weekly crop condition ratings, shift in weather or outside factor, much of the trade the next three days will consist of positioning ahead of Friday’s USDA Crop Production Report, which will include the first survey-based corn crop estimate.
Technical analysis: The short-term technical pattern remains neutral, though bears still have the upper hand after the drop from the spring highs. Near-term resistance extends from the July 29 high at $6.36 1/2 to the July 11 high at $6.58 1/2. Key near-term support extends from last week’s low at $5.87 1/2 to the July low at $5.61 3/4.
What to do: Wait to make additional 2021- and 2022-crop sales.
Hedgers: You should be 90% sold in the cash market on 2021-crop. You should have 50% of expected 2022-crop forward-sold for harvest delivery.
Cash-only marketers: You should be 90% sold on 2021-crop. You should have 50% of expected 2022-crop forward-sold for harvest delivery.
Fundamental analysis: November soybeans fell a second straight session on expectations Midwest rainfall will boost yield prospects with soybeans in critical reproductive phases. But lingering concern dryness may persist into the second half of August limited selling pressure. Much of the Midwest “will receive at least some rain during the next two weeks that will buy crops more time before rain is needed to prevent significant increases in crop stress,” World Weather said. “But much of the region will dry down overall and many areas will need greater rain later this month to keep production potentials high.”
Signs of improving export demand also underpinned prices. USDA early today reported daily sales of 132,000 MT of soybeans for delivery to China during the 2022-23 marketing year. Also today, USDA reported 867,504 MT (31.9 million bu.) of soybeans inspected for export during the week ended Aug. 4, up from 594,958 MT a week earlier and surpassing expectations from 300,000 to 750,000 MT. Analysts expect USDA’s weekly crop ratings later today will reflect further deterioration. The soybean crop is expected to be rated 59% good-to-excellent, down from 60% a week earlier.
Technical analysis: Soybean futures carry a neutral to slightly bullish bias, with the November contract up sharply from its July low but settling today around the middle of a wide trading range over the past six weeks. November futures briefly pushed above the 40-day moving average at $14.14 3/4 earlier today but failed to generate enough buying interest to close above that level. Further resistance is seen at Friday’s high of $14.28 3/4. Initial support comes in around the 20-day moving average at $13.75 and last week’s low at $13.56.
What to do: Get current with advised cash sales. Hedgers should maintain the 10% short hedge position in November futures at $14.73.
Hedgers: You should be 60% forward-sold for harvest delivery on expected 2022-crop production. You also have 10% of expected 2022-crop production hedged in short November soybean futures at $14.73. You should be 95% sold in the cash market on 2021-crop.
Cash-only marketers: You should be 60% forward-sold for harvest delivery on expected 2022-crop production. You should be 90% sold on 2021-crop.
Price action: September SRW wheat rose 4 cents to $7.79 3/4, while September HRW wheat fell 1/2 cent to $8.47 3/4. September spring wheat fell 5 3/4 cents to $8.80 3/4.
Fundamental analysis: Wheat futures ended mixed following two-sided, narrow-range price action as traders watched Ukraine developments and looked ahead to USDA’s Crop Production and Supply and Demand reports Friday. A pullback in the U.S. dollar encouraged corrective buying, as did signs of improved export demand. USDA reported 603,549 MT (22.2 million bu.) of wheat inspected for export during the week ended Aug. 4, up from 308,333 MT a week earlier and above trade expectations ranging from 250,000 to 550,000 MT. Shipments are still running 21.2% behind year-ago, compared with 24.9% behind year-ago last week.
USDA’s weekly crop ratings later today are expected to remain strong for spring wheat. About 70% of the crop is in good-to-excellent condition as of Sunday, based on a Reuters survey, unchanged from a week earlier. Spring wheat harvest is expected to be 9% completed.
Technical analysis: Winter wheat technicals lean neutral to bearish despite today’s price strength, as the market remains in a 2 1/2-month-old downtrend on daily charts. September SRW futures briefly tested the 10- and 20-day moving averages, at $7.89 1/2 and $7.93 1/2, respectively, but failed to close above those initial resistance levels. Key support levels include last week’s low at $7.52; a drop under that level may have bears targeting the January low at $7.38 1/4.
What to do: Get current with advised hedges. Wait on a corrective rebound to increase cash sales.
Hedgers: You have 15% of 2022-crop hedged in short December SRW futures at $7.83. You should be 85% sold in the cash market on 2022-crop. You should be 30% forward-priced on expected 2023-crop for harvest delivery next year.
Cash-only marketers: You should be 85% sold on 2022-crop. You should also be 30% forward-priced on expected 2023-crop production for harvest delivery next year.
Price action: December cotton fell 54 points to 95.59 cents and near the session low.
Fundamental analysis: Cotton futures fell in subdued trading, with U.S. dollar weakness and crude oil strength limiting price downside. The U.S. stock market also leans bullish for cotton futures, as the indexes have been trending up from the June lows and today hit two- to three-month highs. Traders await Friday’s USDA Crop Production Report, which will include the agency’s first survey-based forecast for this year’s U.S. cotton crop. Weather in U.S. cotton country also supported futures. World Weather reported Texas rainfall later this week “will be too little, too late for a serious change in production potentials.”
Recent poor USDA export sales data for U.S. cotton is keeping buyer interest in futures squelched. USDA in its weekly export sales data last Thursday reported U.S. cotton sales reductions of 112,400 running bales (RB)--a second consecutive marketing-year low. If cotton futures prices are to hold present levels in coming weeks, sales and shipments of the U.S. fiber abroad will have to show marked improvement.
What to do: Get current with advised 2021- and 2022-crop sales.
Hedgers: You are 100% priced in the cash market on 2021-crop. You should also be 60% forward-priced on expected to 2022-crop production for harvest delivery.
Cash-only marketers: You should be 100% sold on 2021-crop. You should also be 60% forward-priced on expected to 2022-crop production for harvest delivery.
